Rejuvenon gets boost with $12 million VC round

A $12 million round of venture capital secured last month will allow Houston-based Rejuvenon Corp. to begin testing a new drug to treat disorders associated with aging.

Rejuvenon is developing a compound to boost the level of growth hormones in frail, elderly people that could give them more strength by increasing the amount of muscle in their bodies and building up their immune systems.

Instead of spending years developing a new drug, Rejuvenon announced last week that it has licensed a group of compounds from Novo Nordisk, a large pharmaceutical company based in Denmark. Because Rejuvenon is not starting from scratch, its first product should be ready for animal testing later this year.

Roy Smith, director of the Huffington Center on Aging at Baylor College of Medicine in Houston, is chairman and CEO of Rejuvenon. He formed the pharmaceutical company in March 2000 in an effort to continue research he started at Merck Research Laboratories in New Jersey.

Before re-joining Baylor almost three years ago, Smith worked for 11 years at Merck, a large pharmaceutical company with a $178.6 billion market capitalization. Prior to that, he worked at Baylor for 15 years.

Rejuvenon received a total of $10 million from Novo A/S, BankInvest and San Francisco's Burrill and Co. Another $2 million was raised from Baylor College of Medicine, BCM Technologies Inc. and a few angel investors.

Nancy Chang, one of those individual investors, is chairman, president and CEO of Tanox Inc., another pharmaceutical company based in Houston. Chang says she has a passion for new technology so this is not the first time she has invested in a startup.

Chang picks her investment deals based on the people involved. She was attracted to Rejuvenon because of Smith, who she says has a knowledge of science and product development that gives him more depth than an academician.

"He has a good reputation in the field. He's a very good scientist," Chang says. "Now he's going to run a company. He came in to talk to me about that. I encouraged him. I believe if you have a knowledge in science, you have an advantage."

Other investors came to the table based on what they know about the compounds being developed.

Margaret McCormick, president and chief operating officer of Rejuvenon, says Denmark-based Novo A/S and BankInvest both invested based on the work Novo Nordisk has done on the compounds thus far. Novo Nordisk made the decision to out-license this development project because it is focusing more on diabetes care, she says. Novo Nordisk was the company that hooked Rejuvenon up with BankInvest and Novo A/S, which owns a stake in Novo Nordisk.

"It shows that Novo Nordisk and Novo A/S both believe in the program," McCormick says. "It just wasn't part of their own company's direction at this point."

McCormick became involved with Rejuvenon through BCM Technologies, the venture capital arm of Baylor College of Medicine. Because of his involvement with Baylor, Smith approached BCM Technologies for assistance in forming his new company. McCormick, who has worked with several other startups while at BCM Technologies, says this is the first time she has taken on a more long-term role with one of the companies.

Smith's work at Rejuvenon is a continuation of research he began at Merck. His goal is to treat disorders associated with aging by increasing the level of growth hormones that are released in the body. The pituitary gland does not produce less hormones when people age, it just releases less of them into the body.

"The research I brought here was to extend work to evaluate the effects of stimulating the receptors involved with all this," says Smith, who does not plan to leave Baylor to be a full-time CEO at Rejuvenon.

A treatment is available that involves injecting growth hormones in the patient, but there have been some adverse side effects, such as men developing breasts. The injection treatment is not preferred, McCormick says, because it gives a large dose of the growth hormones all at once, instead of releasing them slowly, like the pituitary gland does naturally.

"We're approaching this from a different angle. We're using a pill that actually regulates the peaks of growth hormones," McCormick says. "Because it's more like the natural physiology, there should be fewer side effects."

Rejuvenon's licensed compounds will stimulate sensors in the brain to control hormone release, Smith says.

"This compound stimulates the brain to tell the pituitary gland to release the amount of growth hormone that was released when we were in our 20s," Smith explains.

The compounds Smith was working with at Merck are no longer available to him, so that's why he licensed the set of compounds from Novo Nordisk.

Six of the compounds already have undergone some testing and are ready for pre-clinical testing. Rejuvenon is contracting out its animal trials to a Scotland company, which will likely do the human testing as well. Rejuvenon expects to be ready for Phase II human studies by early- to mid-2002.

Rejuvenon's Vice President of Safety Assessment Dr. Del Bokelman will travel to Scotland from his office in New Jersey to oversee the testing. Smith recruited Bokelman from Merck, where he was an executive vice president involved with safety.

Seemon Pines, Rejuvenon's director of process research and development, also is a Merck alum. He spent 46 years at the company, where he most recently was a vice president responsible for pharmaceutical process research and development.

The pill that's being developed could be used to treat elderly people, AIDS patients and children with growth hormone deficiencies.

Tech Notes

Questia Media Inc. -- the online library and research service for college students -- laid off 139 employees this week in order to cut costs.

The Houston-based company reduced the work force by 50 percent because executives decided to slow the pace at which the firm was digitizing books to add to its Web site.

A large portion of the company's employees were involved in acquiring books and overseeing the digitization process.

Troy Williams, Questia's founder and CEO, says at one time the firm needed as many as 300 people to keep up with the work, but that's no longer the case.

Questia is slowing its digitization pace because it does not have enough money to fund the process. The company, which has raised a total of $135 million in venture capital over the last two years, is seeking additional funding.

Williams says the restructuring move puts the firm on track to be profitable in 18 months.

"It brings our costs down under control and puts us on a path to match our cost to our revenue stream," he adds.

Questia went live with its online service in January. Approximately 35,000 books are now available over the Internet for the company's subscribers.

Digitization work already is in progress that will bring that total to 60,000 books, Williams says.

Questia had planned to have 100,000 books digitized by the end of this year, but that figure is now up in the air.

Questia was giving away its service for free up until two weeks ago, Williams says.

"Tens of thousands" of people used the service to access library books online during the free trial period, Williams says, but he will not reveal how many subscribers the company has now.

"We've had a five-fold increase in paying subscribers in the last two weeks alone," Williams says. "There's a great demand for our product. People will pay for it."

Last summer Questia was setting records for raising capital. The firm raised $90 million in the largest venture capital financing in Houston's history, based on PricewaterhouseCoopers quarterly MoneyTree survey of VC activity. Investors included OppenheimerFunds, Bulldog Capital Management, Palmetto Partners and TA Associates.